A few days ago Dan wrote about Don Moore’s research on how we accept advice from others. A lab experiment showed that subjects adhered to advice from confident, not necessarily accurate, sources. The findings of another research, led by Prof. Gregory Berns of Emory University, show another aspect of our reaction to advice.

Berns recorded his subjects’ brain activity with an fMRI machine while they made simulated financial decisions. Each round subjects had to choose between receiving a risk-free payment and trying their chances at a lottery. In some rounds they were presented with an advice from an “expert economist” as to which alternative they consider to be better.

The results are surprising. Expert advice attenuated activity in areas of the brain that correlate with valuation and probability weighting. Simply put, the advice made the brain switch off (at least to a great extent) processes required for financial decision-making. This response, supported by subjects’ actual decisions in the task, are troublesome, perhaps even frightening. The expert advice given in the experiment was suboptimal – meaning the subjects could have done better had they weighted their options themselves. But how could they? Their brains were somewhat dormant.

[…] Recent research shows that in the face of “expert advice” parts of our brains involving “valuation and probability weighting” actually turns off. In short we gave over our decision making ability to others providing “credible” advice. (See this piece by Dan Ariely at Predictably Irrational.) […]

These findings are particularly interesting in light of new proposals being made to bring hedge funds under government regulation. In 2008 hedge funds lost approximately half of what global stocks lost for their investors. The argument could be made that if government regulators began to monitor the activity of hedge funds, investors and hedge fund managers may begin to make less well thought out decisions because they believe that the regulators are overseeing and therefore tacitly approving those decisions. And I do not believe that this regulatory body would be consist of “expert economists”.

Right after I read your post here I saw http://www.cbsnews.com/stories/1998/07/08/60minutes/main4848039.shtml which details the error-prone-memory characteristics of victim testimony in a crime – Another interesting application of the expert problem. They detail some articles therein re: studying how selections are made from a police lineup and I wonder if you have research into that area as well.

I am a mathematician, chaos theorist and fuzzy logician with a neat algorithm for judgment-based decision-making. The algorithm has translated into technology that makes mathematically rigorous judgment calls without the biases, moods and “bounded rationality” that limit human reasoning I would love to share my latest papers on soft decision-making with Dan Ariely. Is that possible?

[…] around on the predictably irrational blog and found two interesting articles. the takeaway from one article was that when we receive expert advice it has the potential to make decision making software in your […]

This made me think of Stanley Milgram’s obedience experiment. I wonder if the same parts of our brain are affected or at least the same mechanism is at work that shuts down our ability to make our own judgements and decisions, as it seems to shut down when we believe we are receiving advice from a person superior in knowledge.

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